China’s foreign ministry said the U.S. must withdraw allegations against two state-linked Chinese hackers charged Thursday with intellectual-property cybercrimes (see 1812200059) or risk endangering U.S.-China trade negotiations aimed at averting a March 2 increase in Section 301 tariffs on Chinese imports (see 1812140045). China urges the U.S. “to immediately correct its wrongdoings, stop defaming and discrediting China on the cybersecurity issue, and withdraw its so-called charges against the Chinese nationals so as to avoid seriously damaging bilateral relations and bilateral cooperation in relevant fields,” said a spokesperson Friday. In charging the two Chinese nationals with cybertheft, the U.S. “fabricated stories out of nothing and made unwarranted accusations against China on the cybersecurity issue,” she said. China “has been firmly opposing and cracking down on all forms of cyber espionage. The Chinese government has never participated in or supported others in stealing commercial secrets in any form.”

Unless unfair trade practices are curbed, China “will force technology transfer, and outright steal it when it sees fit,” to become the world’s “preeminent producer, particularly in strategic industries,” Deputy U.S. Trade Representative Dennis Shea told the World Trade Organization Wednesday in Geneva. “China will subsidize and maintain excess capacity in multiple industries, forcing producers in other economies to shut down.” It will justify dumping its products elsewhere with the claim consumers will “pay a little less,” he said. If the U.S. “musters a response,” China accuses the U.S. of “abusing our power and acting irresponsibly,” he said. If China has its way, “we should resign ourselves to nursing the wounds inflicted on our citizens,” he said. “This is not acceptable.” The Trump administration postponed for 90 days to March 2 hiking tariffs on Chinese imports to 25 percent to give negotiators time to work out a comprehensive trade agreement on forced technology transfer, IP theft and other issues (see 1812140045).

Contract manufacturer Jabil has the “agility” to manage “trade and tariff issues” if they create no more than “some choppy seas and a storm here and there,” said CEO Mark Mondello on a Tuesday earnings call. If, however, U.S.-China trade frictions “become some nasty hurricane, I think it’s going to be bad for all,” he said. Jabil, like “everybody else,” is playing wait-and-see as U.S. and Chinese negotiators try to hammer out a comprehensive trade agreement, he said. “In terms of the macro, we’ll see what happens over the next 60, 90 days,” he said. “If the tariff and trade issues get resolved, that’s great.” If not, “there’s nobody that has our scale that can move product around with the agility and the flexibility that we can and, in fact, we do that all the time,” he said.

Customs and Border Protection at our Monday deadline was awaiting Federal Register publication of the Office of the U.S. Trade Representative notice officially delaying the increase in Trade Act Section 301 tariffs on $200 billion in Chinese goods for 90 days to March 2. Though the USTR posted the prepublication notice Friday (see 1812140045), CBP confirmed it would wait to make changes in its Automated Commercial Environment portal until the notice is formally published. ACE is CBP's central system through which importers and exporters file shipment reports. The National Customs Brokers & Forwarders Association of America noted in an email to members some confusion "when customs brokers who transmit entries early for shipments arriving after January 1 notice that CBP's system applies a 25% tariff rate for these products." Brokers should be aware that "10% will be the correct duty rate on January 1, but CBP's system will nevertheless show a duty rate of 25% until official notification is published," said the association.

“Successful negotiation” of a U.S.-EU trade agreement would need to build on World Trade Organization “principles” for removing technical trade barriers, UL told the Office of the U.S. Trade Representative in comments in docket USTR-2018-0035 submitted to help frame U.S. negotiating positions in future trade talks. UL especially wants USTR to be sure a U.S.-EU trade agreement preserves “regulators’ decision making authority,” it said. UL also urges USTR to “consider regulatory cooperation solutions beyond mutual recognition agreements as these are often problematic in implementation.” A successful trade agreement should “enhance the business and investment climate” for services in UL's wheelhouse, including “testing, inspection and certification, that help companies deliver on innovation, compliance, and market access needs as a means to reduce regulatory barriers,” it said.

The new photomask factory that Photronics just opened in Hefei, China, is “designed to capitalize” on the industry’s migration to larger and larger TV screen sizes and the move to 8K, said CEO Peter Kirlin on a quarterly earnings call Wednesday. Two Gen 10.5 panel fabs optimized for 65- and 75-inch LCD TVs are “ramping” in China, “with three more fabs under construction,” said Kirlin. The U.S.-China trade war is the big unknown in keeping supply-chain costs down, he said. “Every day, a new piece of significant news seems to appear that more often than not demonstrates that the tension between the two governments remains high and the ultimate outcome of trade discussions is uncertain,” he said. “There have been many surprises so far and there are most certainly more to come. Short-term, these actions can go either way as far as our business is concerned.” The “direct impact to Photronics” of the Section 301 tariffs imposed so far “has been minimal and not material to our results,” he said. “In the long run, I believe this tension will motivate more, not less semiconductor content to be manufactured in China, and without a doubt, more chips and displays equates to more demand for photomasks,” especially for China-based manufacturers, he said.

IP theft is why this administration levied tariffs on nearly $250 billion in Chinese goods, Assistant Attorney General John Demers told the Senate Judiciary Committee Wednesday. “China’s strategy is the same: rob, replicate, and replace. Rob the American company of its intellectual property, replicate the technology, and replace the American company.” Chairman Chuck Grassley, R-Iowa, noted Huawei Chief Financial Officer Meng Wanzhou was arrested on suspicion of breaking Iranian sanctions (see 1812060042), and that a Chinese firm allegedly tried to avoid export controls for Boeing satellite technology. With the two nations in a 90-day negotiating period, President Donald Trump this week told Reuters he would intervene in the case if its prosecution would prevent a U.S.-China deal. The suggestion “is extremely disturbing,” said Sen. Richard Blumenthal, D-Conn., asking Demers if it disturbed him as well. There is precedence for such action, as the president told the Commerce Department to roll back its “death penalty” for ZTE after it lied about punishing officials who had violated North Korea sanctions (see 1805240064). Demers declined to comment on Wanzhou’s case. “What we do at the Justice Department is law enforcement. We don’t do trade,” he said. Sen. Kamala Harris, D-Calif., told Demers she introduced a bill that would extend the extraterritorial authority of U.S. prosecutors for cyber espionage. Demers said that could be helpful. Peter Harrell, a Center for a New American Security senior fellow, suggested the government should expand bans on imports that use stolen IP; give more funding to the International Trade Commission so it can identify those cases; and create a better private right of action for companies whose property was stolen.

GoPro will move most of its U.S.-bound action-camera production out of China by summer as a hedge against the products’ exposure on “any new” Section 301 tariffs list, said the company Tuesday. GoPro escaped tariffs through the three rounds of duties imposed between July and September, but it's taking no chances on a fourth round, it said. “Today's geopolitical business environment requires agility, and we're proactively addressing tariff concerns” with the move, said Chief Financial Officer Brian McGee. “This diversified approach to production can benefit our business regardless of tariff implications.” McGee spoke on a quarterly earnings call in early November of GoPro preparations to move production out of China if it became “necessary.” President Donald Trump threatened Sept. 17 to "immediately pursue" a fourth tranche of tariffs on $267 billion worth of additional imports if China retaliated for the duties that took effect Sept. 24. China did retaliate, but Trump never acted on the threat. GoPro didn’t comment Tuesday on where it’s moving U.S.-bound production, but said production for markets outside the U.S. would stay in China.

A new U.S.-Japan trade agreement should “promote innovation” and U.S. "competitiveness," so it should include “a robust chapter” on digital trade modeled after the text of the U.S.-Mexico-Canada trade deal, testified Charles Freeman, U.S. Chamber of Commerce senior vice president-Asia, Monday at an Office of the U.S. Trade Representative hearing on U.S. negotiating objectives for a free-trade agreement with Japan (see 1811270002). The digital economy “is growing at almost two and a half times faster than the global economy, and trade in digital goods is growing more rapidly than trade in traditional manufactured goods and agricultural products,” said Freeman. Negotiations with Japan are “a real opportunity to set the highest global standard” intellectual property “creativity and innovation,” he said. “Both countries should take this opportunity to advance a model approach to sustainable access to innovation and creativity by promoting respect for property rights and a return of fair value for innovation.” Along similar lines on negotiating objectives for a potential U.S.-EU pact, the Computer & Communications Industry Association wants the USTR to “seek a holistic trade agreement with the EU to reduce barriers and encourage investment across the economy,” it commented Monday in docket USTR-2018-0035. The USTR is “strongly encouraged” to make digital trade a “priority in these negotiations with the EU,” said CCIA. “Failure to do so would be a significant missed opportunity.” Commitments to digital trade in a U.S.-EU agreement “will be important in ensuring continued EU market access for innovative American firms and in establishing a model elsewhere in the world,” said the Software & Information Industry Association. Though the EU’s position is that privacy can’t be subject to a trade negotiation, the U.S. “should nonetheless strive to come to an agreement providing for a positive cross-border data flow commitment,” it said. The U.S. “should also push back against a highly likely EU request for a cultural carve-out,” it said. There also should be an effort “to establish closer U.S.-EU cooperation on both digital and intellectual property rights issues vis a vis third countries,” it said. A hearing on U.S.-EU negotiating objectives is set for Friday. Comments in the docket were due midnight Monday.

Cable modems that include Chinese parts but are assembled in Mexico are subject to the third tranche of 10 percent Trade Act Section 301 tariffs on Chinese imports, said Customs and Border Protection in a Nov. 27 ruling. The ruling request was submitted by Barnes Richardson lawyer Lawrence Friedman on behalf of Zoom Telephonics. CBP's analysis was on two types of modems -- those that include Wi-Fi gateways and those that don’t. All the components involved are products of China and "bulk-packed board assemblies will be shipped in separate boxes from the remainder of the components including the case components, feet, screws, and labels," CBP said. The assembly work done in Mexico doesn't constitute a "substantial transformation" of the Chinese components, CBP said. The modems are classifiable under subheading 8517.62.0010 and therefore subject to the tariffs imposed Sept. 24, it said. The modems meet the North American Free Trade Agreement’s tariff shift requirement and are a product of Mexico for marking purposes, CBP said.